By kostandina
For individuals and business owners alike, understanding your credit score, how it works, and how to improve it, is very important. If you are completely unfamiliar with the term, this article is here to help.
The Intelliscore Plus credit score is a credit score given to businesses that is based on both one’s personal and business (if applicable) credit data. Essentially, it is a credit-risk evaluation that potential lenders can use to evaluate whether or not to go into business with someone.
When investors, creditors, or other lenders decide whether or not to finance a certain business, they must feel assured that they will be paid back. Lending money to a company that has a high risk of being unable to pay back the funds is not a safe bet, so this score is taken heavily into account before any money is given.
The Intelliscore Plus credit score range uses a very simple way of scoring from 1-100. As with any credit score, the lower the number the higher the risk, and vice versa.
The ranges are broken down into Risk Classes, and are grouped as follows:
Of course, ideally, you want your score to be as high as possible to show potential lenders that their risk with you is low. However, businesses should aim to be within the first two risk classes to give themselves the best possible chance of acceptance when applying for a business loan.
Experian uses a complex process of over 800 different variables pulled from public records in order to determine your score and the risk your credit history poses to potential lenders. However, there are three key components that these variables can be grouped into which can be understood more simply.
Sometimes referred to by credit bureaus as “recency”, payment history is basically a snapshot of your entire history of paying your credit card bills. They will look at your account’s overall debt balance, the number of accounts that are delinquent (have past-due payments or debts), and the number of times your account(s) has become delinquent.
Frequency looks at the number of times you do certain things regarding your payment. This includes the frequency at which your account has gone bankrupt, has been sent to collections, and the number of liens and judgments you may have received.
On the other hand, it will also take into account any pattern changes in frequency, such as late payments that have improved over time, or how often you make payments before the actual due date.
This part focuses on how much you actually use your credit. For instance, how much credit is currently in use for either personal or business expenses? And, are your current balances low, or are they typically close to the account’s limit caps? What are your account limit caps? Are any balances currently delinquent or have they all been paid off? How much credit has been extended both to the business and personally?
In a nutshell, these are the factors being used to determine your credit score. Of course, if you have a limited business credit history, Intelliscore will look at more of your personal credit history until you’ve had time to build up the business side.
As there are many factors that go into determining your credit score, there are also many ways that you can improve it. Here are some ways to get started:
Paying your bills on time is a must because it shows credit card companies (and future potential lenders) that they can trust you to get them their money back on time. Early payments are even more incentive to trust that you are going to pay on time.
Taking on some debt is often necessary in order to build what you need to start making money, but it can be a slippery slope. There are ways to monitor your debts to assure they don’t get out of hand.
For example, make sure you are not passing 50% of your revolving credit limits. Also, try to make your credit card payments before the credit bureau makes its report.
This one may seem obvious, but you actually need to use your credit card, and often! If you have signed up for various credit cards over the years, but you almost never use them, they will become dormant and they will not help your score (in fact, some creditors might just close them for not using them).
That all being said, still try to keep your balances low (below 30%-40% of the high credit limits).
You can see your Experian Intelliscore Plus credit score for free by going to the Experian website. You should be regularly monitoring your Experian business credit report (checking at least once a year), to make sure that your business, and your personal finances, remain in a good financial situation.
Although Experian is one of the major credit bureaus, it is not the only one. There are three major US credit bureaus: Experian, Equifax, and Transunion. The three companies are all competitors, so they are not all privy to the exact same information (which may lead to varying scores given by the different bureaus).
There are also smaller, less well-known credit bureaus that offer the same services, although they may not have as much access to credit information, therefore their credibility might not be as high in the eyes of potential lenders.
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